Rate rise calls are fading

THE threat of a rise in interest rates has subsided after the number of Bank of England monetary policy members voting for a hike fell. Minutes from May's monthly meeting revealed Paul Tucker, the first member to call for a rate rise in February, switched his vote in favour of keeping rates on hold at 4.75%.

The only member now voting for a quarter point rise in the base rate is Sir Andrew Large, the Bank's Deputy Governor responsible for financial stability, who has called for an increase for three months in a row.

Economists had been expecting at least one increase but a series of poor economic data has led to the view that rates may now be cut.

Land Registry figures showed the number of properties sold in first quarter of the year dipped by a third on the previous year, while High Street sales have fallen to their lowest levels for a decade.

The minutes state: 'The immediate policy decision turned on balancing the medium-term upside risks against the near-term downside risks. With inflation expectations currently well anchored around the target, the near-term risks warranted maintaining an unchanged official rate this month, while remaining ready to act to offset incipient inflation pressures.' Large argued, however, that inflation, currently at 1.9%, posed such a risk that a small rise in rates was necessary.

Howard Archer, chief UK economist at Global Insight, said: 'The overall tone of the minutes complement the May inflation report, indicating that the MPC have become modestly more downbeat about growth prospects and slightly less concerned about inflation over the longer term. This is reinforced by Paul Tucker switching back to the no change camp.'